Any mention of ‘contracts’ or ‘legal documents’ usually brings with it an aura of seriousness and legitimacy. Even though there are still many Malaysians who sign documents without clearly understanding all the terms stated, it’s not something we take lightly.
So, it’s no surprise that when we see a handwritten contract simply scribbled onto a piece of paper, we’re more likely to laugh it off. But, what if we told you that the handwritten “document” is actually real and legally binding?
Handwritten contracts can be legitimate too!
Get ready, for you might have to rethink your definition of what a “contract” is.
You see, it doesn’t always have to be in writing for it to be legally binding. It doesn’t have to be stamped. And it certainly doesn’t have to have complicated legal jargon (fun fact: it’s called ‘legalese’).
To oversimplify it, a contract is an agreement between two or more parties.
It doesn’t matter if the contract is in the form of text messages typed out in broken English over WhatsApp, or a string of emails between you and your employer. Even scribbles on a piece of tissue can be admissible in court!
The simplicity of these "contracts" may come as a surprise to most people, since they usually associate legal documents with complicated terms and statements to be signed on paper.
So, what agreements are considered as contracts?
Did you know: there’s actually a clarifying statement in the Contracts Act 1950 (the act that governs contracts in Malaysia)? More specifically, in section 10(1):
10(1) All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
If it’s THAT straightforward, why don’t we just bid goodbye to all the complicated processes in signing Tenancy Agreements, the Sale and Purchase Agreements (SPA), and other types of contracts altogether?
If valid contracts can be electronic or even verbal, wouldn’t it be more convenient to just discuss something with the other party over the phone?
Well, not really, mainly due to the following:
- Some contracts are required by law to be in writing (some, like a Will, are even required to be written in ink!).
- Having it in writing allows for clear interpretation if required to be brought to court as evidence. After all, the whole point of a contract is to protect your rights in case things go bad!
What exactly makes for a legally binding contract?
It isn’t so much the channel which the contract was delivered. More importantly, a document will only be considered as legally binding if it fulfills these 4 essential elements – Offer, Acceptance, Consideration and Intention. Let’s take a closer look at each:
An offer has to be made to the other party (or parties). In the contract, the specifics of the offer has to be made crystal clear – how it’s offered, and the T&C’s that come along with it.
A contract is only a contract once the offer along with all its T&C’s are fully accepted. This acceptance usually comes in the form of a signature, but can be verbal as well.
After an offer is accepted, something of value is exchanged – cash, company shares, services, material goods etc.
This is the intention to create legal relations. See, not all contracts are made with the knowledge that they’re entering a contract.
Business-related ones usually do have the intention to create legal relations, whereas those between family and friends typically do not.
So yes, even buying pasta from a restaurant is considered a contract! The restaurant sells its pasta for RM15 (offer), you order it (acceptance), and you pay the RM15 (consideration) upon receiving it. All this is held in a commercial business setting, therefore intention is present too.
But just because a contract fulfills these 4 elements, doesn’t make it automatically valid!
This is because of the other 2 elements of a legally binding contract – Capacity and Free Consent:
All parties in the making of the contract have to possess the capacity to enter one. Which means of legal age (18 here in Malaysia), and was of sound mind during the signing of the contract, among other things.
2) Free Consent
Consent is rather self-explanatory. You can read more about it in section 14 of the Contracts Act 1950 here, but essentially it means that neither party was threatened or forced to sign the contract.
To better illustrate our point…
Here’s a sample scenario to help you have a clearer image of some of the risks involved in writing your own contract:
Sara rents out her brand-new apartment unit to Jean for a duration of 3 years, at a rental price of RM1,300 per month.
Hiring a lawyer is costly and time-consuming, so Sara decides to draft her own Tenancy Agreement. They happily sign the document, and Jean moves shortly after.
Everything goes well… until one month after vacant possession. Jean complains about broken bathroom tiles and mould underneath the kitchen sink cupboards.
Jean insists that it’s Sara’s responsibility as the landlord to fix the damages and refuses to pay her rent on time until the defects are fixed, paying inconsistently as she wishes.
Now, who pays for the defects?
Let’s say the handwritten agreement only stated “…costs of general defects will be absorbed by landlord”. Seems simple enough, except…
What defects exactly? What’s considered general costs? And what if the defects were only discovered after a year?
Typically, brand new properties bought directly from the developer will have a defect liability period of 24 or 36 months from the date of vacant possession.
This isn’t applicable for sub-sale properties though. For a sub-sale, the tenant will usually inspect every corner of the property and bargain with the landlord beforehand for a cheaper rate if there are any defects or repairs required.
If Jean didn’t know any of the above, she’d have assumed that as the landlord, Sara will always hold the responsibility to cover ALL defects during the 3 years.
But Sara, on the other hand, assumed that it’s common knowledge for the tenant to conduct all due diligence before signing the agreement.
Lesson learnt: In conducting a rental or sale, a lot of assumptions are usually made. Remember, no matter how obvious it seems, always state everything clearly!
Can Sara sue Jean for not paying her rent on time?
Say the agreement only stated under the section "tenant’s responsibilities" that “…monthly rental needs to be paid on time.”
Okay, again it sounds simple, but… What time is "on time"??
A specific time frame has to be clearly stated to protect the landlord in case situations such as Sara and Jean’s occur. A good example of how this should be written in the Tenancy Agreement would be:
“…the monthly rental of 1,300 Malaysian Ringgit (RM1,300) only, to be due and payable before or no later than the 1st week of each month.”
This way, there’s absolutely no chance for sneaky tenants to take advantage of the unclear payment terms.
For all we know, if an exact date is not stipulated, “on time” could be interpreted as the last sighting of the Virgo constellation in the night sky.
So do I have to get a lawyer to write my contract?
Despite all this, the short answer is no. There’s absolutely no law which states that a contract has to be written by a practicing lawyer.
Templates for all kinds of contracts can be found easily on the web, and to copy one, paste it onto a Word document and edit it according to your needs is just as easy as it sounds. And is legally valid too (provided it fulfills all the 6 elements mentioned above)!
But remember, the whole purpose of a contract is to protect the rights of the parties involved. As rosy as things may seem now, no one knows when they might suddenly be launched into a sticky situation.
And it’s during these sticky situations that the true power of a single, well-crafted sentence within a contract shines – a sentence which you probably didn’t know you had to include in your contract.
But if you still endeavour to write your own contract, first brush up your knowledge with our guides on Tenancy Agreements and Sale and Purchase Agreements for a better understanding of what they should contain.
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